KATHMANDU: Economic Digest presents a brief yet comprehensive roundup of major business developments in Nepal, delivered in clear and accessible summaries.
Nepal’s economy entered the new fiscal year 2026/27 with a mix of optimism and persistent structural challenges. Investor confidence strengthened as the NEPSE surged more than 3 percent amid robust trading activity, even as Nepal Rastra Bank withdrew Rs 50 billion from the banking system to absorb excess liquidity, signaling continued vigilance over monetary conditions.
The implementation of the new federal budget, tax reforms and monetary policy reflects the government’s push to stimulate economic activity through lower tax rates, higher public salaries and reduced industrial input costs. However, weak public finances remain a concern, with revenue growth slowing sharply to 5 percent and capital expenditure falling to a six-year low, highlighting chronic weaknesses in development spending despite higher budget allocations.
Sectorally, the government’s renewed support for domestic manufacturing, particularly the footwear industry, and improved fertilizer supply point to efforts to strengthen production and import substitution, while the launch of digital revenue payments indicates continued public service modernization.
Political instability, however, continues to undermine fiscal governance, as Sudurpashchim Province entered the fiscal year without an approved budget. Meanwhile, declining gold prices may provide short-term relief to consumers, but delayed monsoon rains threatening paddy transplantation underscore the vulnerability of Nepal’s largely agrarian economy to climatic shocks, reinforcing the need for stronger implementation capacity alongside ambitious fiscal and economic reforms.
NEPSE jumps nearly 80 points as turnover reaches Rs 4.58 billion
The Nepal Stock Exchange (NEPSE) index climbed 79.74 points, or 3.06 percent, to close at 2,677.54 on Friday. The Manufacturing and Processing sector posted the biggest gain, rising 4.60 percent. Shreenagar Agritech Industries Limited hit the positive circuit, while Ankhu Khola Hydropower Company recorded the highest turnover at Rs 222.3 million. Meanwhile, Aatmanirbhar Laghubitta Bittiya Sanstha fell 15 percent on its trading debut. Corporate Development Bank and Reliance Spinning Mills also registered strong trading volumes, with turnovers exceeding Rs 175 million and Rs 155 million, respectively.
Gold falls to Rs 282,100 per tola, silver drops to Rs 4,200
Gold and silver prices declined sharply in the domestic market on Friday, according to the Federation of Nepal Gold and Silver Dealers’ Association. The price of gold fell by Rs 3,100 per tola to Rs 282,100, down from Rs 285,200 on Thursday. Silver also became cheaper, dropping by Rs 125 per tola to Rs 4,200 from the previous day’s rate of Rs 4,325 per tola.
NRB withdraws Rs 50 billion from banking system through deposit collection instrument
Nepal Rastra Bank (NRB) withdrew Rs 50 billion from the banking system on Friday to mop up excess liquidity. The central bank’s Monetary Management Department conducted an auction for a 90-day deposit collection instrument, open only to licensed Class A, B and C financial institutions. The principal and interest will be repaid on October 15. Bids offering lower interest rates received priority, while institutions failing to maintain sufficient settlement balances could face blacklisting.
Government collects Rs 50.10 billion in revenue during final three days of FY 2025/26
The government collected around Rs 50.10 billion in revenue during the last three days of fiscal year 2025/26, according to the Financial Comptroller General Office (FCGO). Revenue collections stood at Rs 16.50 billion on July 14, Rs 21.17 billion on July 15 and Rs 12.43 billion on July 16. The amount was lower than the Rs 64 billion collected during the corresponding period a year earlier. The FCGO also reported that annual revenue growth slowed to 5 percent, well below the average annual growth rate of 17 percent recorded between 2012 and 2022.
Prime Minister Balen pledges support for domestic footwear industry
Prime Minister Balendra Shah (Balen) has pledged government support to strengthen Nepal’s domestic footwear industry by promoting import substitution, increasing exports and creating employment opportunities. During a meeting with the Footwear Manufacturers Association of Nepal (FMAN) on Friday, he promised better coordination among government agencies to expand skill-based manufacturing training and encourage private sector branding. The government also plans to tighten oversight of imported raw materials to support local production. FMAN urged authorities to curb cross-border smuggling, bring informal imports into the tax and VAT system and enforce mandatory quality testing for imported footwear.
Federal budget for fiscal year 2026/27 comes into effect
The federal government’s Rs 2.12 trillion budget for the fiscal year 2026/27 officially came into force on Friday. Presented by Finance Minister Swarnim Wagle on May 29, the budget focuses on macroeconomic stability, structural reforms and infrastructure development. Of the total allocation, Rs 1.27 trillion (59.8 percent) has been earmarked for recurrent expenditure, Rs 431.10 billion (20.3 percent) for capital expenditure and Rs 422.24 billion (19.9 percent) for financial management. The budget is 25.2 percent larger than the previous fiscal year’s estimate and aims to boost economic growth and improve public service delivery.
New tax measures and monetary policy take effect with new fiscal year
A series of tax reforms, salary adjustments and monetary policy measures came into effect on Friday with the start of fiscal year 2026/27. The government raised the income threshold for the 1 percent tax slab to Rs 1 million and reduced the highest personal income tax rate from 39 percent to 29 percent. Salaries of government employees were increased by 21 percent. Customs tariff categories were reduced from 11 to seven, lowering import costs for raw materials used in 273 products, while excise duties on 360 products were removed. New measures include a 5 percent VAT on electricity consumption above 50 units, a 3 percent equity fee on private services and a 0.5 percent skill promotion fee on gold and silver. Nepal Rastra Bank aims to keep inflation below 5.5 percent.
Capital expenditure falls to six-year low in FY 2025/26
Nepal’s capital expenditure dropped to a six-year low in fiscal year 2025/26, with only Rs 190.84 billion, or 46.79 percent of the allocated Rs 407.88 billion, being spent, according to the Financial Comptroller General Office (FCGO). Development spending was affected by political instability and frequent leadership changes. In contrast, recurrent expenditure reached 88.4 percent of its allocation at Rs 1.04 trillion, while financial management expenditure stood at 92.56 percent. Revenue collection totaled Rs 1.24 trillion, or 83.87 percent of the Rs 1.48 trillion target, highlighting continued pressure from high recurrent spending.
Government supplies over 561,000 metric tons of chemical fertilizer in FY 2025/26
The Ministry of Agriculture and Livestock Development said the government supplied 561,493.85 metric tons of chemical fertilizer by July 8, achieving nearly 94 percent of its annual target. The government had allocated Rs 28.821 billion for fertilizer imports during the fiscal year. Total fertilizer sales, including existing stock, reached 518,278.55 metric tons, comprising 307,016.60 metric tons of urea, 192,931.15 metric tons of DAP and 18,330.80 metric tons of potash. As of July 8, national warehouses held 92,592.35 metric tons in stock, while 288.75 metric tons remained in transit.
Sudurpashchim enters budget deadlock as Rs 37.70 billion budget remains unapproved
Sudurpashchim Province has entered the new fiscal year 2026/27 without an approved budget after the Provincial Assembly failed to endorse the proposed Rs 37.70 billion spending plan. The government led by Chief Minister Kamal Bahadur Shah lost its majority following the withdrawal of support by the CPN-UML, preventing it from introducing an interim budget through an ordinance. While the Provincial Comptroller General’s Office said government spending has come to a halt, revenue collection will continue under existing laws. The province faced a similar budget impasse in fiscal year 2024/25, when it operated without a budget for nearly two months.
Transport Department rolls out online revenue payment system
The Department of Transport Management has introduced an online revenue payment system to simplify services for driving licence applicants. Effective Friday, applicants can pay all required government fees digitally while applying for new licences or renewals. The system also supports auto-filling application details using the National Identity Card or the Citizen App QR code. The department has additionally set up an official email address to receive technical complaints and payment-related queries.
Delayed monsoon disrupts paddy transplantation in Dhanusha
A prolonged dry spell has severely affected paddy transplantation in Dhanusha, with inadequate rainfall leaving fields parched and irrigation facilities insufficient. Farmers say seedlings prepared for transplantation are turning yellow in nursery beds due to the lack of moisture. Local farmer Govinda Yadav warned that the seedlings could be ruined if substantial rainfall does not arrive within the next few days. Many farmers also say rising fuel and electricity costs have made pump irrigation too expensive, increasing concerns over lower crop production.
Ministry recovers additional Rs 467.3 million in industrial rent arrears
The Ministry of Industry, Commerce and Supplies has stepped up efforts to recover outstanding rent from industries operating in government-owned industrial estates. Following instructions from Minister Gauri Yadav, the ministry collected an additional Rs 566,092 on Thursday, taking total recoveries to Rs 467.3 million. Electricity has been restored to five industries that cleared their dues, while power remains disconnected to 21 others. Continental Component and Services owes Rs 37.5 million, while Continental Services has outstanding dues of Rs 10.1 million.
Indian power secretary reviews progress of Arun-III hydropower project
Indian Power Secretary Pankaj Agarwal visited Sankhuwasabha on Thursday to inspect the 900MW Arun-III Hydropower Project. Accompanied by Indian Ambassador to Nepal Naveen Srivastava and Central Electricity Authority Chairman Ghanshyam Prasad, he reviewed construction at the Pukhuwa powerhouse and the Phyaksinda dam site. Agarwal praised the pace of work and urged the SJVN Arun-III Power Development Company to maintain high standards of quality and sustainability. Chief Executive Officer Pankaj Chaudhary also briefed the delegation on community development and environmental initiatives linked to the project.
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